"IMF Official Warns of Economic Fragmentation's Potential 7% Global GDP Cut"

Gita Gopinath, the International Monetary Fund's First Deputy Managing Director, warned that economic fragmentation and shifts in bilateral trade could lead to a "new Cold War," with potential losses of 2.5% to 7% of global GDP. Gopinath highlighted the conflict in Ukraine and U.S.-China tensions as factors contributing to this fragmentation. The COVID-19 pandemic and Russia's invasion of Ukraine have prompted governments to focus on domestic production and "friend-shoring." Gopinath emphasized the need for pragmatic approaches to preserve the benefits of free trade, including "green corridor" agreements for critical minerals and minimum cross-border flows for essential commodities. She also urged countries to narrow national security-based import restrictions and consider alternative suppliers before bringing production home.